Telstra, health and labour laws listed for reform

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The OECD has urged the Federal Government to make patients pay
more for health services, step up the pace of competition reforms,
require Telstra to sell Foxtel and its cable network, and cut the
top tax rate, in a report today urging more economic reform.

The OECD's annual report on Australia gives the Government a pat
on the back for its economic management, endorses its reform
agenda, and plays down the risks of Australia's rapidly rising debt
and current account deficit.

But the Paris-based organisation, set up by Western governments
as a source of independent economic advice, warns that the pace of
reform has flagged - and says the Federal Government itself has
been to blame. In recommendations that seem to reflect the thinking
of Treasury and the Productivity Commission, it urges the Federal
Government to use its new Senate majority to carry out sweeping
reforms ranging from workers' rights and welfare to health,
education and environmental protection.

"There is no guarantee that Australian economic performance will
continue to be as impressive as it has been over the past 13
years," the report warns. "There is still substantial unfinished
business."

Its central theme is that the federal and state governments must
do more to lift productivity growth and participation in the
workforce, so Australia can maintain a high rate of economic growth
as its population ages rapidly over the next 20 years.

It argues that competition policy reforms drove Australia's
improved productivity growth in the 1990s, and a second burst of
reform is needed now to sustain that growth.

While much of that mirrors the Government's own plans - above
all on labour market reform - it goes well beyond them to propose
reforms that would increase costs or remove benefits for
politically influential groups such as farmers, health consumers,
Telstra and the Murdoch and Packer empires.

In an unusually sharp rebuke, it singles out the Howard
Government as almost the worst laggard in implementing competition
reforms. By mid-2003, it says, the Commonwealth had failed to
complete reviews and reforms in 22 priority areas for policy
reform, two-thirds of all the priority sectors it had undertaken to
finish a year earlier.

"The Commonwealth compliance rate was the second lowest of all
Australian governments, and not commensurate with its leadership
role," the OECD reports. It notes that while the Commonwealth can
withdraw funds to punish states for not implementing competition
reforms, no such discipline applies to the Commonwealth itself.

Its wide reform agenda proposes that:

· The Government should make health reform a priority,
aiming to "raise productivity in the health sector itself and
transfer more of the costs to users of services".

· Telstra should be broken up before being privatised,
separating ownership of the cable network from its retail business
to ensure a level playing field between it and its competitors. Its
50 per cent stake in Foxtel (co-owned by News Corporation and the
Packer empire) should also be sold off, as part of policy reforms
to encourage competition in pay TV services.

· Farmers should no longer receive water supplies
subsidised by urban users, and cross-subsidies between different
sectors of farming should be phased out.

· Schools should reduce class sizes and focus more on
vocational education to try to reduce the teenage drop-out rate,
which is one of the highest in the Western world.

· The Government should cut the top tax rate and lift the
threshold at which it applies, and reduce the even higher effective
marginal tax rates facing people moving from welfare to work.

Treasurer Peter Costello said the report was "a strong
endorsement of the Government's economic management and Australia's
economic performance". He said it also endorsed the Coalition's
"pro-growth" strategy for tackling the challenges of an ageing
Australia.